The Fiat-Cliff

I would like to start this piece by recommending a rather thorough and viable
chart study of the US dollar by an analyst writing under the pseudonym Rambus,
titled Dollar
Bears Prepare to Hibernate. Rambus has produced some excellent charts in
this piece along with sound analysis, and in my view, provided readers with
valuable information and insights.

It is my hope that Rambus and the readership at large will not mind if I attempt
to add another layer to his cogent work.

Albeit spawning from a relatively recent and still fragile signal, at present,
my work also reveals a long-term bullish bias for the dollar and a contrasting
bearish bias for gold. I will endeavor to add value to the good work of Rambus
using a monthly bar chart going back to 1971.

The first thing I would add relative to the big-picture monthly chart from
1981 presented by Rambus, rests specifically with regard to the H&S top
mentioned. That peak occurred in 2001, and more importantly, the bearish neckline
associated with it, which rests near the 80.39 level was absent from the observations
he shared.

This is a critical FIAT-CLIFF bearish (neck) line in the sand, which the dollar
has been struggling seriously with since July of 2007. The Dollar has traded
above and below the FIAT-CLIFF for nearly six years. A wide coiling pattern
akin to a rather sizable flag pattern has formed, which in this case, would
imply the presence of a continuation pattern with better than fair odds for
an eventual bearish resolution.

I have replicated Rambus's 4-point fractal sequence and boxed point 4 on the
left, and point 1 on the right to illustrate the genesis of this major neckline.
This is a line very much worth keeping a sharp eye on.

As noted in the lower right, the neckline drawn from these two points governs
the active defense or suspension status of a downside price target in the low
forties, which if achieved, would result in a 50% haircut from current levels.

Risk of Ruin

The final layer I wish to share surrounds what I refer to as a "risk of ruin" trajectory.
When breached, risk-of-ruin-trajectories calibrate downside price targets,
which for all intent and purpose virtually destroy 100% of all existing value.

Spawning from the pivot low in the late 70's and the first point labeled 1
in the late 80's, the thin rising trendline moving upward and to the right,
ending just above the prayerful Ben, identifies a clear risk of ruin trajectory.

So long as the dollar maintains trade and closes beneath this rising trajectory,
complete obliteration of the fiat currency to the tune of 90% from current
levels, is a defended and working target. The FIAT-CLIFF line simply adds a
level of immediate drama associated with the first 40% of a cataclysmic 90%
wipeout.

Note how the risk of ruin trajectory twice rejected the dollars attempt to
break above it upon twice approaching the rising resistance rail associated
with right shoulder of the FIAT-CLIFF head and shoulder pattern.

Having said all that, until the shorter-term price action dictates otherwise,
we remain bullish the dollar right alongside Rambus.

In wrapping up this view from 50,000 feet, each of us should hope and pray
along with Ben for a sustainable rally to the 105 target, which would place
the dollar-trade above the implied risk of ruin trajectory.

If such a bullish feat occurs, to remove the risk of ruin entirely, the dollar
must never register a monthly close beneath that rising trajectory for if it
does, the risk of ruin is back in play.

The Elliott Wave Take

Below is a long-term chart similar to the one Rambus used from 1981. I have
held to this wave count (as has the dollar) for nearly a decade. This does
not imply that I will be right in the end, it simply proves that I have been
right thus far.

To fully appreciate our unconventional application of the theory, specifically
as it relates to the above chart, please refer to "US
Dollar: Wave Counts, Flight-to-Safety" penned in June of last year.

The following is brief excerpt from the above link:

As graphically inferred by the articles introductory image, there is
no doubt whatsoever that since its general inception, the US dollar remains
by politically exploitive design, enmeshed in a long-term secular decline
toward oblivion.

The end game will play out like those of all other fiat currency throughout
humankind's history, which shall of course lead to an outright failure
and the existential necessity for the country (or world) inevitably to
manufacture and adopt a suitable replacement.

Since the dot.com bubble, 911, and the 2002 market crash, Elliott Wave Technology's
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Joe Russo is an entrepreneurial publisher and market analyst providing digital
online media solutions designed to assist traders and investors in prudently
and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005,
he has established an outstanding record of accomplishment, including but
not limited to, ...

In 2005, he elicited a major long-term wealth producing nugget of guidance
in suggesting strongly that members give serious consideration to apportioning
10%-20% of their net worth toward the physical acquisition of Gold (@
$400.) and Silver (@ $6.00).

On May 6 of 2007, five months prior to the market top in 2007, though
still bullish at that time, he publicly warned long-term investors not
to be fooled again, in "Bullish
Like There's No Tomorrow."

On March 10 of 2008, with another 48% of downside remaining to the bottom
of the great bear market of 2008-2009, in "V-for
Vendetta," using the Wilshire 5000 as proxy, he publicly laid out
the case for the depth and amplitude of the unfolding bear market, which
marked terminal to a rather nice long-run in equity values.

On February 11, 2011, he publicly made available his call for a key
bottom in the long bond at 117 '3/32. Within a year and half
from his call, the long bond rallied in excess of 30% to new all
time highs in July of 2012.

For the benefit of members and his general readership, he responded
to widespread levels of economic and financial uncertainty in the development
of Prudent
Measures in 2012.

He publicly warned of a major
top in Apple on October 26, 2012 in the very early stages of
a 40% decline from its all time high.